G20 expects more clarity from Spain on use of bank aid

June 13, 2012|Reuters

MEXICO CITY (Reuters) - Leaders from the world's top economies are expecting that Spain will lay out more details next week of how it will use a European aid package to bolster its banks, Mexican Finance Minister Jose Antonio Meade said on Wednesday.

Ratings agency Moody's cut its rating on Spanish government debt by three notches on Wednesday to one notch above junk status, saying the newly approved euro zone plan to help the country's banks will increase the country's debt burden.

Euro zone finance ministers agreed on Saturday to lend Spain up to 100 billion euros ($125 billion) to shore up its banks, but the structure of the bailout has not been confirmed.

Mexico will host a summit of Group of 20 leaders on June 18-19 which will be dominated by the euro zone debt crisis.

"Some details are lacking and the announcement has generated some doubts that we hope Spain will take advantage of the forum to clarify," Meade said.

"Also, there is some doubt, once they have the money, the access to this liquidity, how exactly are they going to use this to strengthen the Spanish scheme," he said.

Meade made a reference to market concerns, which helped drive Spanish 10-year bond yields to a record high on Wednesday, that repayment of the loans to shore up banks in the event of default would have a higher priority than repaying regular government bonds.